Strong Mid/long-term Growth Potential in High Growth Industries
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
Hiking our 2022 earnings forecast, we raise our TP on BH Flex in consideration of its expanding market share towards its North American client. Earnings should normalize from 2H21. We view BH Flex as an attractive investment vehicle, believing that it is undervalued in light of the stable growth of its main business and strong growth potential of its new businesses (eg, automotive).
Raise TP in line with earnings forecast upgrade
Adhering to a Buy rating, we raise our TP on BH Flex from W23,000 to W26,000. In detail, the upward adjustment to our TP reflects a hike in 2022F EPS by 10.8% in consideration of its expanding market share towards its major North American customer.
First, for 2021, we revise down our OP forecast by 6.4% but increase our NP estimate by 4.3%. The reduction to OP stems from a conservative estimate of 2H21E OPM, given the likelihood of continuing relatively-low ASP shipments for the low/mid-end smartphones of domestic customers. However, 2021E NP is pushed up in consideration of forex-related gains.
On the other hand, for 2022, we ratchet up our OP and NP projections by 7% and 10.8%, respectively, believing that: 1) the firm’s market share towards its key North American client will rise amid the decline of competitors; and 2) sales diversification is likely given the possibility of OLED adoption in the customer’s tablet products.
Favorably view steady growth of main business and growth potential of new businesses (eg, automotive)
Investment points for BH Flex include: 1) ongoing stable growth at its main business; 2) its strong mid/long-term growth potential in high growth industries such as automotive electronics, foldable smartphones, and 5G antennas; and 3) its relative undervaluation.
At the main business, sales and margins increase is expected, as domestic peers are highly likely to withdraw from related businesses, which should result in a greater market share for BH Flex within core customers. The possibility of OLED installation in a customer’s tablet displays is an additional positive.
Over the mid/long term, we expect BH Flex to benefit from expansion of the automotive electronics, foldable smartphone, and 5G antenna sectors. In particular, there are good chances for new business growth in the automotive electronics arena. Despite such strengths, BH Flex’s valuations remain below the industry averages, leaving its share price in attractive territory.